UnitedHealth posts quarterly profit above Wall Street estimates, on track for turnaround

The logo for UnitedHealth Group appears above a trading post on the floor of the New York Stock Exchange, April 17, 2025. (AP Photo/Richard Drew, file)

NEW YORK — UnitedHealth on Tuesday raised its annual profit forecast and beat expectations for first-quarter results as the healthcare conglomerate kept costs in check and received improved government payments for its health insurance services.

CEO Stephen Hemsley, who took over almost a year ago, has sought to rebuild investor confidence following a turbulent stretch marked by a senior executive’s death, escalating medical costs, a federal probe and criticism of insurance industry practices.

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The company has since undertaken several measures, including exiting non-U.S. businesses and some health plans, reshuffling leadership roles, and increasing investments in artificial intelligence.

CFO Wayne DeVeydt said the company is focused on maintaining a “prudent” approach to its 2026 outlook in order to maintain trust and transparency.

“You may say, ‘It looks like you beat the quarter by more than that. Why not raise by more?’” DeVeydt said. “We like to believe our execution is the primary driver, but we want to see if any of these trends change in April and May.”

UnitedHealth shares rose seven per cent in premarket trading. The results also boosted peers, with CVS Health and Humana between three and five per cent.

“Shares are rallying, as investors recognize that margins may have troughed in 2025, and 2026 guidance is moving up rather than down, which is a nice change of pace from last year,” Morningstar analyst Julie Utterback said.

Keeping costs in check

The industry has been grappling with increased costs since mid-2023 due to a surge in demand for healthcare services under government-backed Medicare plans for older adults or individuals with disabilities.

Changes in enrollment for Medicaid plans for lower-income Americans have also left insurers with those who require more medical care, adding to costs for insurers.

UnitedHealth reported a first-quarter medical cost ratio - the percentage of premiums spent on medical care - of 83.9 per cent, compared with analysts’ estimates of 85.70 per cent.

“We actually think we’re going to do a little bit better than we anticipated,” DeVeydt said,adding the company expects to lose 1.3 million Medicaid members. “Still losing membership, but retaining a little bit more than we thought.”

UnitedHealth expects 2026 adjusted profit per share to be more than US$18.25, an increase of 50 cents from its prior forecast. Analysts were expecting a profit of US$17.86 per share, According to data compiled by LSEG.

First-quarter adjusted profit came in at US$7.23 per share, beating estimates by 66 cents.

During the quarter, UnitedHealth agreed to acquire Alegeus Technologies, a health care technology platform, and sold its Optum UK business. It now plans to buy back at least US$2 billion of its stock by the end of the second quarter.

Optum health in focus

Operating income at the company’s Optum health services unit fell 15 per cent to US$3.3 billion, due to heightened medical costs and ongoing investment. The unit also enrolled fewer patients in its coordinated care plans.

The dip in enrollment is intentional, DeVeydt said, as the company exited less favorable contracts. UnitedHealth announced during a fourth-quarter earnings call this year that Optum faced regulatory and cost challenges, representing an US$11 billion blow to the unit over a three-year period.

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First-quarter revenue at Optum Health, which provides primary care, was US$24.1 billion. Revenue at Optum Rx, UnitedHealth’s pharmacy benefit manager, rose two per cent to US$35.7 billion.

The results are starting to provide confidence to investors that Optum Health is on the mend, Evercore ISI analyst Elizabeth Anderson said.

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Reporting by Amina Niasse in New York, Sneha S K and Sriparna Roy in Bengaluru; Editing by Matthew Lewis and Anil D’Silva